What Hope for Sears?

With the news that Sears has now lost Aylwin Lewis, its nominal CEO (the de facto CEO remains its owner, Eddie Lampert), I took the opportunity to ask Jesse Eisinger a few questions via IM about what is going on over there. Jesse’s something of an expert on Sears: he wrote a great piece on the company and its management for the February issue of Portfolio.

Felix Salmon: when you have a second, you can explain to me wtf is going on at Sears

Jesse Eisinger: what’s your confusion?

FS: is this strategy, or panic?

JE: Lewis had no significant influence at Sears. He was the public face, but had no real authority. Lampert kept all the authority for himself and relied most heavily on his number two at the hedge fund, Bill Crowley, to implement his decisions. Lewis didn’t have any retailing experience, either. So he was the wrong guy for the job, even if he had been allowed to do it.

FS: Did Lampert inherit Lewis, or hire him?

JE: Lampert hired him.

JE: One of Eddie’s Big Ideas is to gather Smart People in a room to Solve Problems, rather than relying on that silly notion that experience matters.

JE: And it’s not a bad strategy: Smart people can have fresh eyes, etc. But smart people must be encouraged to think creatively and be given responsibility and resources. The problem is that Eddie undermines his smart cookies, by depriving them of enough money to invest in their ideas.

FS: from reading your article, another of Eddie’s Big Ideas is to do Big Things (like stock buybacks or splitting companies in two or firing the CEO) — rather than Little Things like investing in the stores

FS: so while all this news might look like Big Changes Are Afoot, in fact we can probably just look forward to More Of The Same, right?

JE: No, i think big changes are really afoot. The reorganization seems to me a concession from Eddie that remaking Sears as a retailer won’t work without radical changes. So he’s broken the company up into units that seemed to be designed for sale. Making a real estate unit and a brand division to house the likes of Kenmore, Craftsman. Land’s End suggests he wants to dress these assets up for auction. But it’s still a puzzling reorganization in some ways. He has a new online unit. Why isn’t online an integral part of the retailing operations? He has said each of the five units will have their own P&Ls, including the "support" unit. That area of business isn’t a profit center and making it so will only put pressure on customer support and marketing.

JE: The main problem is that it’s a terrible time for asset sales. So dress em up all you want, Eddie. Prices will still be punk.

FS: And the yet-to-be-hired new CEO? Given that the strategy is still being set by Eddie, can shareholders have any hope that a CEO with real retail experience will be hired & given the ability to turn the company around? Or would that be expecting too much from a control-freak like Lampert?

JE: That would be expecting too much.

JE: He has reached out already to some leading retail figures and they have turned him down. Why would they want to be number two to Eddie Lampert?

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